Quantifying and Modeling Price Volatility in The  Dutch Intraday Electricity Market

13 Pages Posted: 18 Dec 2023

See all articles by Dane Birkeland

Dane Birkeland

Wageningen University

Tarek AlSkaif

Wageningen University and Research (WUR)

Steven Duivenvoorden

affiliation not provided to SSRN

Marvin Meeng

affiliation not provided to SSRN

Joost M. E. Pennings

Maastricht University; Wageningen University and Research (WUR); University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Abstract

This paper aims to provide a solid basis for the quantification of price volatility in the Dutch intraday electricity market. To do that, price volatility is analyzed through realized volatility, which is adapted from foundations in quadratic variation theory. Realized volatility is then estimated using differing multivariate linear regressions models as well as a random forest regression. These models are built around features pulled from quadratic variation theory, market fundamentals, liquidity, and information asymmetry. Furthermore, the impact of features within the models are assessed using permutation feature importance and recursive feature elimination. The models leverage a multi-year dataset from EPEX SPOT containing completed trades of hourly products as well as other complementary data sources. The results of the paper include recommendations for future price volatility research within intraday electricity markets, mainly: i) strive to utilize order book data to have a clearer idea of how prices settle and true bid-ask spreads, and ii) increase model robustness by combining modeling efforts to assess DA, ID and balancing market impacts on price. This paper aims to benefit multiple stakeholders namely, academic researchers, industry participants, and European regulators, by providing a structured view on price volatility quantification and estimation for internationalized intraday electricity markets.

Keywords: intraday electricity markets, multivariate linear regression, price volatility, price realized volatility, market fundamentals

Suggested Citation

Birkeland, Dane and AlSkaif, Tarek and Duivenvoorden, Steven and Meeng, Marvin and Pennings, Joost M. E., Quantifying and Modeling Price Volatility in The  Dutch Intraday Electricity Market. Available at SSRN: https://ssrn.com/abstract=4668045 or http://dx.doi.org/10.2139/ssrn.4668045

Dane Birkeland

Wageningen University ( email )

P.O. Box 47
6700 AA
Netherlands

Tarek AlSkaif (Contact Author)

Wageningen University and Research (WUR)

Netherlands

Steven Duivenvoorden

affiliation not provided to SSRN ( email )

No Address Available

Marvin Meeng

affiliation not provided to SSRN ( email )

No Address Available

Joost M. E. Pennings

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

HOME PAGE: http://marketing-finance.nl/cv/cvpennings.pdf

Wageningen University and Research (WUR) ( email )

Hollandseweg 1
Wageningen, 6706KN
Netherlands

HOME PAGE: http://marketing-finance.nl/cv/cvpennings.pdf

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

1301 W. Gregory Drive
326 Mumford Hall MC-710
Urbana, IL 61801
United States
217-244-1284 (Phone)
217-333-5538 (Fax)

HOME PAGE: http://marketing-finance.nl/cv/cvpennings.pdf

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